Table 5.2
Consider the following data for an independent demand item maintained by Vicki Crittenden, the proprietor of a local auto repair shop:
Weekly demand = 50 units
Ordering cost = $8/order
Holding cost = $4/order
Weeks in a year = 50
-Use the information in Table 5.2.Due to new ordering procedures initiated by Crittenden,the ordering cost is dropping to $4/order.At the same time,the weekly demand increases to 64 units per week due to an increase in business.What effect do these changes have on the EOQ quantity for this item?
A) The EOQ quantity remains unchanged.
B) The EOQ quantity increases by 20 percent.
C) The EOQ quantity decreases by 20 percent.
D) Sufficient information is not available for answering this question.

Question

Table 5.2
Consider the following data for an independent demand item maintained by Vicki Crittenden, the proprietor of a local auto repair shop:
Weekly demand 	= 50 units
Ordering cost 	= $8/order
Holding cost 	= $4/order
Weeks in a year 	= 50
-Use the information in Table 5.2.Due to new ordering procedures initiated by Crittenden,the ordering cost is dropping to $4/order.At the same time,the weekly demand increases to 64 units per week due to an increase in business.What effect do these changes have on the EOQ quantity for this item?
A) The EOQ quantity remains unchanged.
B) The EOQ quantity increases by 20 percent.
C) The EOQ quantity decreases by 20 percent.
D) Sufficient information is not available for answering this question.

Quizplus · Accepted Answer

The EOQ quantity decreases by 20 percent.The EOQ formula is:EOQ = sqrt((2*D*O)/H)where:D = demand per weekO = ordering cost per orderH = holding cost per unit per weekIn this case, the demand has increased from 50 units per week to 64 units per week, and the ordering cost has decreased from $8 per order to $4 per order. The holding cost remains the same at $4 per unit per week.Plugging these values into the EOQ formula, we get:EOQ = sqrt((2*64*4)/4) = 32 unitsThis is a decrease of 20 percent from the original EOQ quantity of 40 units.

Table 5.2 Consider the Following Data for an Independent Demand Item Maintained